Waltham, Mass.-based A123, which reported a net loss of $258 million for full-year 2011, also said it has secured nearly $73 million in "debtor-in-possession" financing from Johnson Controls to keep its operations going during the sale process.

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Deal with Chinese Firm Scrapped

In August, A123 announced that it had signed a non-binding pact with Wanxiang Group Corp., China's largest automotive-components manufacturer, in which the Chinese company would invest up to $450 million in ailing A123 for an 80% stake in the firm.

At the time, A123 CEO David Vieau said the capital infusion "would remove the uncertainty regarding A123's financial situation."

However, Vieau on Wednesday said A123 decided to scrap the agreement "as a result of unanticipated and significant challenges to its completion."

"We believe the asset-purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time," Vieau asserted in a news release.

Under the terms of the agreement, which still requires bankruptcy-court approval, Johnson Controls would acquire:

A123's automotive-business assets, including all of its automotive technology, products and customer contracts.

The deal also includes provisions "through which Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses," according to A123.

"A123 also continues to engage in active discussions regarding strategic alternatives for its grid, commercial, government and other operations, and has received several indications of interest for these businesses," the company said in a news release.

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